Blackstone Mortgage Trust(BXMT) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal control evaluations Financial Statements This section presents the unaudited consolidated financial statements and accompanying notes for the periods ended September 30, 2021 Consolidated Balance Sheets Total assets increased to $20.71 billion by September 30, 2021, driven by loan growth, with corresponding increases in liabilities and equity Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $211,180 | $289,970 | | Loans receivable, net | $20,276,078 | $16,399,166 | | Total Assets | $20,705,872 | $16,958,955 | | Liabilities | | | | Secured debt, net | $11,170,330 | $7,880,536 | | Securitized debt obligations, net | $2,836,049 | $2,922,499 | | Total Liabilities | $16,435,320 | $13,054,724 | | Total Equity | $4,270,552 | $3,904,231 | Consolidated Statements of Operations Net income for Q3 2021 was $83.8 million, while nine-month net income surged to $295.3 million, primarily due to a favorable change in credit loss provision Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Income from loans, net | $117,424 | $114,961 | $340,528 | $322,727 | | (Increase) decrease in CECL reserve | ($2,767) | $6,055 | $49,432 | ($173,466) | | Net income attributable to BXMT | $83,757 | $89,860 | $295,254 | $54,054 | | Net income per share (basic and diluted) | $0.56 | $0.61 | $2.00 | $0.39 | Consolidated Statements of Cash Flows Net cash from operations was $255.0 million, while significant investing outflows of $3.93 billion were largely offset by $3.62 billion from financing activities Cash Flow Summary for the Nine Months Ended September 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $255,022 | $261,296 | | Net cash used in investing activities | ($3,926,040) | ($105,726) | | Net cash provided by financing activities | $3,616,649 | $120,778 | | Net (decrease) increase in cash | ($54,369) | $276,348 | Notes to Consolidated Financial Statements This section provides detailed explanations of the company's accounting policies, including CECL, and financial results, covering loan portfolio, debt, and equity - The company is a real estate finance company originating senior loans collateralized by commercial real estate in North America, Europe, and Australia, operating as a REIT[31] - The company adopted the Current Expected Credit Loss (CECL) standard (ASU 2016-13) on January 1, 2020, which requires estimating credit losses over the life of financial instruments, resulting in a $17.65 million charge to retained earnings upon initial adoption[49][59] - The company is actively managing the transition from LIBOR to alternative reference rates like SOFR and SONIA, as detailed in its accounting policies and recent developments[94][96][97] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial condition, results of operations, loan portfolio, and liquidity, highlighting key performance indicators Key Financial Measures and Indicators The company focuses on key metrics like EPS, dividends, Distributable Earnings, and book value per share, with Q3 2021 EPS at $0.56 and Distributable Earnings at $0.63 Q3 2021 Key Metrics per Share | Metric | Q3 2021 | | :--- | :--- | | Net Income per Share | $0.56 | | Dividends Declared per Share | $0.62 | | Distributable Earnings per Share | $0.63 | | Book Value per Share | $26.92 | - Distributable Earnings, a non-GAAP measure used to evaluate performance and determine dividends, excludes non-cash items like equity compensation and unrealized gains/losses, including changes in the CECL reserve[267][268] Loan Portfolio The company originated $4.7 billion in loans in Q3 2021, growing its $22.0 billion portfolio with a 65.1% LTV and improved credit quality Loan Activity - Q3 2021 (in billions) | Activity | Amount | | :--- | :--- | | Loan Originations | $4.7 | | Loan Fundings | $3.9 | | Loan Repayments and Sales | ($0.9) | | Total Net Fundings | $3.0 | - The total investment portfolio stood at $22.0 billion with a weighted-average origination LTV of 65.1% and an all-in yield of L+3.54%[278] - The company collected 100% of contractual interest payments due during Q3 2021, demonstrating the portfolio's strength and borrowers' financial capacity[283] - The portfolio's weighted-average risk rating improved to 2.8 as of September 30, 2021, from 3.0 at year-end 2020, indicating improved credit quality[286] Results of Operations Net interest income increased in Q3 2021, but net income decreased to $83.8 million due to CECL reserve changes, while year-to-date net income surged to $295.3 million Quarterly Results Comparison (in thousands) | Account | Q3 2021 | Q2 2021 | Change | | :--- | :--- | :--- | :--- | | Net interest income | $117,424 | $113,951 | $3,473 | | (Increase) decrease in CECL reserve | ($2,767) | $50,906 | ($53,673) | | Net income attributable to BXMT | $83,757 | $131,595 | ($47,838) | Year-to-Date Results Comparison (in thousands) | Account | Nine Months 2021 | Nine Months 2020 | Change | | :--- | :--- | :--- | :--- | | Net interest income | $340,527 | $322,727 | $17,800 | | Decrease (increase) in CECL reserve | $49,432 | ($173,466) | $222,898 | | Net income attributable to BXMT | $295,254 | $54,054 | $241,200 | Liquidity and Capital Resources The company maintained $1.1 billion in total liquidity as of September 30, 2021, with a 4.1x total leverage ratio and $1.6 billion in unfunded loan commitments Liquidity Sources as of September 30, 2021 (in thousands) | Source | Amount | | :--- | :--- | | Cash and cash equivalents | $211,180 | | Senior secured notes, net (issued Oct 2021) | $395,000 | | Available borrowings under secured debt | $452,438 | | Loan principal payments held by servicer, net | $299 | | Total Liquidity | $1,058,917 | Leverage Ratios | Ratio | September 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Debt-to-equity ratio | 3.1x | 2.5x | | Total leverage ratio | 4.1x | 3.6x | - The company has net unfunded loan commitments of $1.6 billion, which it expects to fund over a weighted-average period of 3.2 years[336] Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including interest rate, credit, and currency risks, and outlines mitigation strategies - The company's business model is generally structured such that rising interest rates increase net income, with 98% of investments being floating-rate, creating a net positive correlation to interest rate movements[362] Annualized Net Interest Income Sensitivity to Interest Rate Changes (in thousands) | Rate Change | Impact on Net Interest Income | | :--- | :--- | | +50 bps | ($14,464) | | +25 bps | ($8,763) | | -25 bps | $6,387 | | -50 bps | $6,457 | - Credit risk is mitigated by a low portfolio-wide origination LTV of 65.1%, strong institutional sponsors, and active asset management informed by Blackstone's real estate platform[374][375] - Currency risk is managed by matching the currency of foreign assets to related borrowings and using foreign currency forward contracts to hedge substantially all of the net asset exposure[380][382] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective[383] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[384] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, senior security defaults, and a list of exhibits Legal Proceedings As of September 30, 2021, the company was not involved in any material legal proceedings - The company reports no involvement in any material legal proceedings as of September 30, 2021[387] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to risk factors were reported for the period[388] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[389] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[390] Other Information The company reported no other information required to be disclosed under this item - None[391] Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to financing agreements, CEO/CFO certifications (Sections 302 and 906), and XBRL data files - Key exhibits include an amendment to the Master Repurchase Agreement with Citibank and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act[393]